The Federal Reserve awarded more than $2 billion in construction work on its headquarters renovation without establishing a guaranteed maximum price for the project, the central bank’s inspector general found.
The 120-page evaluation, released Wednesday, found no crime. Inspector General Michael Horowitz wrote that investigators found no reasonable grounds to believe a federal criminal law had been violated and identified no administrative misconduct.
But the report describes a project the Fed never managed to a number. The Board set an internal limit of $857 million in April 2020 on what it was willing to spend on construction, but never shared it with its construction manager or the outside representative it hired to watch costs on its behalf. The inspector general found the limit was never updated and became ineffective as a control.
Construction costs have more than doubled, from $921 million budgeted in February 2020 to $2.018 billion in the Board’s most recently revised construction budget. The total project budget has risen to $2.381 billion.
The findings undercut the case the White House built against former Chairman Jerome Powell. Office of Management and Budget Director Russell Vought objected in July 2025 to rooftop terrace gardens, VIP dining rooms, water features and premium marble. Horowitz concluded those features did not materially contribute to the cost increases. OMB did not immediately respond to a request for comment.
President Donald Trump called for Powell to resign in a post on Truth Social the day the report came out, quoting the inspector general’s finding that the Fed had not set a guaranteed maximum price more than four years into construction.
“An absolutely unheard of situation,” Trump wrote. He said he asked Attorney General Todd Blanche “to study the report, and make a determination as to what to do,” and that Powell should be sued by the government “for either corruption or incompetence” if he does not step down. The White House did not immediately respond to a request for comment.
The Fed takes no appropriation from Congress. It covers its expenses out of its own earnings and sends what is left to the Treasury. In 2021, before the central bank began posting losses, that came to $107.4 billion.
“Spending more on the renovation leaves less money to send,” Orphe Divounguy, chief economist of the Quantitative Research Group and a former Zillow economist, told The Center Square. “If government spending and other revenue stay the same, Treasury must borrow more to cover the difference.”
Most reserve banks are sending nothing right now. The Fed’s weekly balance sheet showed a systemwide deferred asset of $233.1 billion as of Wednesday, earnings the banks must generate before remittances resume. Three banks – Atlanta, St. Louis and Dallas – showed positive remittances due; the other nine did not.
“Additional renovation spending can therefore reduce payments now or delay future payments,” Divounguy said. “Either way, Treasury receives less than it otherwise would.”
Fed officials told investigators that inflation was a major driver of the increase. Horowitz’s report found inflation was clearly a factor but did not account for the scale of the increases, particularly in mechanical, electrical and plumbing work. Two such packages rose 203%, from a $178 million estimate to $539 million awarded, over a period when construction inflation ran about 16%.
Across all four mechanical, electrical and plumbing packages, costs went from an estimated $206 million to $694 million. Applying the 16% rate the inspector general cited to that $206 million baseline produces about $34 million in inflation-driven growth, roughly 7% of the $488 million increase, according to Divounguy’s calculation.
“Inflation contributed, but the broad construction inflation benchmark falls far short,” he said. “Inflation alone is not a sufficient explanation. The report identifies other contributors but does not quantify their individual effects.”
Senate Banking Committee Chairman Tim Scott, R-S.C., said in a statement that he welcomed the report.
“Inflation does not change the Fed’s responsibility to manage its resources prudently and be accountable to Congress,” he said. “This Committee will continue rigorous oversight to ensure the Fed is transparent and stays focused on its mission.”
Internal dashboards reported the project on track for years. The report found the benchmarks were reset each time the budget grew. The budget indicator was flagged at risk for four straight quarters in 2024 while the project overall was still reported on track.
The Fed has turned the project over to the General Services Administration, which announced Thursday that it will serve as project executive. Administrator Edward C. Forst pledged “greater accountability, cost discipline, and effective project management.”
In a letter to Horowitz, Fed Chairman Kevin Warsh wrote that the central bank will promptly complete negotiations on a guaranteed maximum price and engage an independent auditor “to verify the accuracy and compliance of all awarded costs to date.”
Fed spokesman Eric Kollig pointed to Warsh’s letter and said all project budgets were approved by the Board’s governors. He did not answer who approved the contract modifications that took the construction contract from its original $1.5 million award for preconstruction services to more than $2 billion, or identify the firms running the job, saying he would respond later.
The Justice Department served the Fed with grand jury subpoenas in January 2026. Powell said in a video statement at the time that the subpoenas threatened an indictment over his June 2025 testimony about the renovation.
The U.S. Attorney’s Office contacted the inspector general on April 9, 2026, and met with his staff a week later to discuss the scope of the evaluation, according to the report. U.S. Attorney Jeanine Pirro closed the criminal probe on April 24, saying she was doing so “as the [inspector general] undertakes [his] inquiry.” Her office did not respond to questions about whether she will revisit it.
It has happened before. The report notes the same failure to set a spending limit in a 2014 review of the Fed’s Martin building renovation. That project ultimately took 11 years and rose from $203 million to $454 million. The Board closed all 11 recommendations from that earlier work.
